By requiring mortgage brokers to meet volume targets to retain accreditation, lenders are disadvantaging borrowers and encouraging some brokers to engage in risky behaviour, said Peter White, executive director of the Finance Brokers Association of Australia (FBAA).
White spoke to The Adviser following a report from ABC’s Four Corners which accused brokers and banks of using “aggressive sales tactics” to win customers in a target-based environment.
Responding to suggestions that the commission-based remuneration structure compelled brokers to prioritise volume over stability, White said that criticism should instead be directed at the volume-based hurdles brokers need to leap over to maintain their accreditation with lenders.
“Brokers shouldn't have to maintain minimum volumes just to retain their accreditation because at the end of the day . . . that sort of mentality of ‘you need certain volumes to retain accreditation’ has the risk . . . of potentially causing the wrong style of behaviour,” he said.
White further noted that accreditation hurdles could end up disadvantaging borrowers. “People shouldn't be pushed in a certain direction. You should be able to have the freedom of choice that is the most suitable that you can do for your client and not do anything that may put a question over that.”
On the other hand, cases of borrowers suffering from mortgage stress weren’t always the fault of brokers. Borrowers and lenders also need to take responsibility, according to White.
“Sometimes it's not necessarily the broker's fault, and at the end of the day, it's the lender who makes the decision on their approval. It's not a one-stop blame shop. It can be issues on multiple sides, but unquestionably, the broker has a duty of care in their responsibilities and responsible lending conduct.”
Ross Le Quesne, a broker at Aussie Home Loans Parramatta, agreed with White’s statements. He said brokers perform extensive research to ensure loans are suitable and repayable for clients, even when faced with a 2% rate increase.
He also noted that “no one” forces a borrower to take out a loan.
“For someone like myself, that's been in the industry for 15 years and been through many, many different cycles, I think... brokers do give [clients] the best flexibility, the best choice and quite often the cheapest rate, because we have a variety of lenders and can review their products.”
The relationship brokers forge with clients is designed to “create a client for life,” Le Quesne said. The difference between brokers and home finance bank staff is that “if anyone’s good [at their job at the bank], they get promoted and moved up the ranks and don’t maintain a relationship with the same person.”
“There is so much to be said for having a good, ethical mortgage broker that does the right thing by you. I think the whole [negative attitude towards brokers] is unfair on [them]. Most of the brokers that I know... want to do the right thing by their clients,” he said.
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